March 30th, 2015 Business News

Business owners who wish to dispose of their business may be eligible to reduce their Capital Gains Tax liability under the Entrepreneurs’ Relief rules.

Entrepreneurs’ Relief rules currently mean business owners pay capital gains tax at a rate of just 10%, not the normal rates of 18% or 28%.

Does my business qualify?

Your disposal will qualify if it falls into any of the following categories; a disposal of all or part of a sole trader or partnership business (including the assets of the business after it closed); shares in a limited company in which you hold a minimum of 5% of the voting rights; or assets you have lent to your business.

What are the rules?

The disposing party must have owned the business or interest for a period of at least twelve months from the date of the sale, or the date of the business closing. You must sell or dispose of the business assets within 3 years of the business or the business being sold.

If the sale takes the form of a share disposal, you must have a minimum of 5% of the company’s voting rights and you must either be an employee or a director of the company (or at least an employee or director of a company within the group). Crucially, the company’s main activity must be trading (as opposed to a non-trading company such as an investment holding company).

If you wish to obtain Entrepreneurs’ Relief on any assets that you have lent to the business, then you must have been lending the asset to the company for a period of at least one year up to the date of the sale.